Mexico instructs Talos and Pemex to unite the Zama field across two blocks

HOUSTON -- Talos Energy announced that on July 7, 2020, the company received a notice from Mexico's Ministry of Energy ("SENER") instructing the partners of Block 7 and Pemex to unitize the Zama field. Talos is the operator of Block 7 in a partnership with Wintershall Dea and Premier Oil. The Zama field extends from Block 7 into the neighboring block to the east, which is operated by Pemex; therefore, to maximize the value of the reserves the constitution of a formal unit is required prior to the final investment decision and field development.

Under Mexican regulation, the four parties now have up to 120 business days to deliver a Unitization and Unit Operating Agreement ("UUOA") to SENER for approval. The UUOA will be the governing document of the unitized consortium over the life of the Zama field, addressing such topics as initial participating interests, roles of the parties, and reimbursement of exploration and appraisal costs spent to date, as well as a redetermination mechanism for adjusting the initial participating interests as additional technical data is collected. These elements, according to Mexican regulation, should be based on standard industry practices for unitization agreements from around the world.

The Zama development envisages two fixed production facilities with a total capacity for 150 thousand barrels of oil per day plus associated gas. Once installed, these platforms will be the deepest facilities ever installed in Mexico at approximately 550 feet (170 meters) of water.

Talos President and Chief Executive Officer Timothy S. Duncan commented, "We are encouraged by the progress that SENER, CNH, and Hacienda have made on the Zama unitization process despite these difficult times, they have worked with transparency and in the interest of accelerating value creation through the Zama discovery. We have continued to invest in the front-end engineering and design work despite the recent pullback in commodity prices, so we can remain on pace to submit timely development plans. We are highly confident that the Zama field can make a material contribution towards the goal of increasing Mexico's oil production under the current administration. We look forward to working closely with Pemex to quickly finalize a fair and mutually beneficial agreement for all parties involved."